Freight railroad Union Pacific says 2Q profit up 53 percent as shipments rise in all segments

Union Pacific says 2Q profit up 53 percent

DALLAS — Union Pacific Corp. says its recovery from recession is on track, and the company’s shares rose on the news.

The nation’s biggest railroad said Thursday that second-quarter net income increased 53 percent to $711 million. All six of its business groups showed growth for the first time in six years.

Revenue rose 27 percent thanks to an increase in carloads over last year, when the nation was suffering through a recession that cut into shipments of all kinds of goods.

Union Pacific said it doesn’t know which way the economy is going, but it expects more growth in volume of goods carried over its tracks this year and beyond.

The Omaha, Neb., company said its net income equaled $1.40 per share compared with $465 million or 92 cents per share a year earlier. Revenue was $4.18 billion.

Analysts surveyed by Thomson Reuters expected profit of $1.21 per share on revenue of $4.08 billion.

The shares rose $3.96, or 5.7 percent, to $73.08 in afternoon trading.

Union Pacific’s biggest customers range from car makers to farmers. Many consumer products arriving by ship from Asia are put on its freight cars for delivery from the West Coast to points across the U.S.

Railroads are often seen as a barometer of the overall economy — customers ship fewer products when times are bad, then ramp up when consumers have more money to spend.

Union Pacific’s increase in second-quarter income comes after East Coast freight railroad CSX Corp. reported this month that a rising U.S. economy helped boost its quarterly profit 36 percent.

CEO James R. Young told The Associated Press that the company is hiring and expects to recall most of its 2,300 furloughed workers within a year.

“We just started to do some hiring. It’s been a long time since we have been in the market,” Young said, adding that recalled workers could replace those who quit or retire.

The company averaged 42,130 employees in the first three months of 2010, down 6 percent in one year.

Union Pacific said its six divisions all saw growth ranging from 13 percent in agricultural goods to a doubling in shipments of vehicles.

Executives told analysts on a conference call that they expect to see strength in the same areas in the second half of the year. They said even though estimates of auto sales have dropped, inventories are low enough that manufacturers will need to ship vehicles to the dealers.

Businesses are buying and shipping more commodities, including coal and other products, they said, but the consumer market looks more tenuous.

“If there is a dark cloud,” said John Koraleski, the railroad’s executive vice president of sales and marketing, “it’s the continued lack of recovery in housing construction, which along with continued high unemployment is keeping alive the question of just how engaged the consumer is in this recovery.”

On the cost side, Union Pacific said it paid more for fuel. Its average price for diesel rose 46 percent in the June quarter compared with a year earlier.

And the railroad did slightly worse in keeping its trains running. Average train speed slowed by 4 percent; the railroad blamed June flooding in the Midwest and track maintenance work.

Longbow Research analyst Lee Klaskow said Union Pacific will have more chances than other railroads to raise prices and grab more cargo coming off ships. He raised estimated 2010 and 2011 earnings per share by 4 percent to 7 percent.

AP Transportation Writer Samantha Bomkamp in New York contributed to this report.